NEW YORK (CNN/Money) -
A surprise miss in revenues sent Yahoo's stock plunging in after-hours trading, but analysts say the dip is much ado about nothing, with the company boasting strong growth and profitability.

Yahoo! reported $875 million in revenue, excluding fees shared with affiliates, a figure known as traffic acquisition costs (TAC). Though a 44 percent gain over the same period last year, the consensus estimate was for $881 million, according to Thomson First Call.

The stock was down 10 percent in after-hours trading.

"People were expecting a blowout number and got an in-line number," said Tim Kierstead, a vice president in research for The Boston Company, a money management firm. "But the numbers themselves were pretty solid. Revenues were up very strongly, money is still flowing in this sector and these guys are still one of the leaders. But when you get a high valuation stock and expectations aren't met, you get a pretty big pullback."

The company gave guidance for revenue in a range of $880 million to $930 million for the third quarter, lower than was hoped for, according to David Edwards, equity analyst for American Technology Research. Yahoo! executives said this figure reflects a seasonal decline in usage for the third quarter as well as a currency headwind caused by a strengthening of the dollar, which affected the company's sizable European business.

"I think people were hoping for more of a 'beat-and-raise' quarter to generare optimism for end of '05," said Edwards. "But the key metrics are very strong, and the outlook is great for the next 12 to 18 months."

Yahoo! reported earnings per share of $0.51, including a 38 cent gain from the sale of an investment. Excluding that gain, earnings met the consensus estimate of $0.13, according to Thomson First Call data.

The company got a big boost in the number of users of its fee-based services like e-mail and fantasy sports leagues. Yahoo! reported that it had 10.1 million paid relationships at the end of the second quarter, up from 6.4 million in the same quarter last year and a 1.2 million increase from last quarter.

But analysts say marketing is far and away the biggest part of the company's business. Yahoo!, like rival Google, has also been enjoying the robust online advertising market, particularly "sponsored" advertisements based on specific keyword searches. But Google has been the darling of Wall Street, surging up more than 250 percent since the company's initial public offering in August and trading above $300 at times.

In a research note, Citigroup analysts expressed concern that Google is gaining an ever-increasing share.

David Hallerman, senior analyst for New York-based research company eMarketer, said he thinks that Yahoo! is holding its own.

"Paid search will continue as the major revenue stream for online advertising, and Google is getting the lion's share of that revenue," he said. "But in terms of other areas of online advertising and traditional companies looking to put part of their ad budget online, Yahoo! is getting probably more of those dollars than any other Web site because it is such a large portal and there are so many ways to target those ads just in terms of interest among visitors."

Kierstead said he expects that in the short term, people will expect Google will have even stronger results, but he doesn't think the revenue miss will have a huge impact on Yahoo!.

"Growth is still strong, and (ad) dollars are still moving from more traditional media into the internet," he said.

The analysts from American Technology Research and eMarketer quoted in this story do not own shares of Yahoo! or other companies mentioned and their firms have no investment banking relationships with the companies. The Boston Company owns shares of Yahoo!